G.R. No. L-75197. June 22, 1987. E. RAZON, INC. and ENRIQUE RAZON, petitioners, vs. PHILIPPINE PORTS AUTHORITY, PRIMITIVO S. SOLIS, JR. and VICENTE T. SUAZO, JR., respondents. MARINA PORT SERVICES, INC., intervenor.
FACTS

Petitioner E. Razon, Inc. (ERI), later known as Metro Port Service, Inc. (MPSI), was the arrastre operator at Manila South Harbor under a management contract with the government, originally awarded in 1966 and subsequently renewed. The contract was last renewed in 1980 for an eight-year term. Petitioner Enrique Razon, the majority owner, alleged that in 1978, under coercion from associates of then-President Marcos, he was forced to endorse 60% of ERI’s stock to Alfredo Romualdez without receiving payment, leading to a loss of control. After the 1986 EDSA Revolution, Razon reassumed control, reorganized the board, and initiated operational improvements, which were acknowledged by respondent Philippine Ports Authority (PPA) in a July 9, 1986 letter.
On July 18, 1986, following a truckers’ demonstration, the PPA sent a letter to MPSI demanding an explanation for various alleged contractual violations and operational deficiencies. Without awaiting MPSI’s reply, the PPA, on July 21, 1986, unilaterally cancelled the management contract for alleged violations, including unauthorized stevedoring, inadequate equipment, failure to submit reports, non-compliance with port regulations, lack of a safety officer, and non-payment of claims. The PPA immediately appointed intervenor Marina Port Services, Inc. as the interim operator. Petitioners filed this certiorari proceeding, arguing the cancellation violated their right to due process.

ISSUE

Whether the Philippine Ports Authority violated the petitioners’ right to due process in unilaterally cancelling the management contract without granting them a reasonable opportunity to be heard.

RULING

Yes, the Supreme Court ruled that the PPA’s unilateral cancellation violated the petitioners’ constitutional right to due process. The legal logic is anchored on the principle that administrative proceedings, which affect substantive rights, must comply with the fundamental requirements of fairness and the opportunity to be heard. The Court emphasized that the PPA’s act of cancelling a substantial eight-year management contract based on serious allegations was a quasi-judicial function. By issuing the cancellation order immediately after sending a mere demand letter and without conducting a formal investigation or hearing where ERI/MPSI could present evidence and defend itself, the PPA acted arbitrarily. The PPA’s letter of July 18 was a mere accusation, not a hearing. Due process demands more than an ex parte evaluation; it requires a chance for the party charged to confront the evidence, cross-examine witnesses, and argue its case before a final, prejudicial decision is rendered. The Court found that the gravity of the cancellation, which effectively terminated a property right (the contract), necessitated a proper hearing. The subsequent creation of an investigating committee by the PPA after the fact did not cure the defect, as the cancellation was already implemented. Therefore, the PPA’s action was declared null and void for being issued with grave abuse of discretion amounting to lack or excess of jurisdiction.